Oct. 9 (Bloomberg) -- Declining global rice stockpiles and lower production in India will push prices higher, Jim Rogers, chairman of Rogers Holdings, said.
“The world is very vulnerable to production problems,” Rogers, who correctly predicted the start of commodities rally in 1999, said in a phone interview late yesterday. “We’re already seeing it in India. That’s going to mean higher prices somewhere along the line.”
Rice stockpiles of the world’s five largest exporters are forecast to plunge by a third to the lowest level in five years, and below last year when prices surged to a record, Concepcion Calpe, senior economist at the UN Food and Agriculture Organization, said in Bali today.
Global rice prices soared in 2008 amid declining inventories, sparking fears of a global food crisis. This prompted exporters including India and Vietnam to curb sales to cool inflation and cut supplies available for countries like the Philippines, the world’s biggest importer.
Total stockpiles held by Thailand, Vietnam, the U.S., Pakistan and India will fall to about 20 million metric tons at the end of the marketing year on Sept. 30, from 30 million tons a year earlier, on lower-than-forecast crops and rising demand for imports, Calpe said at a conference today.
The weakest monsoon in India in at least seven years may cut the nation’s rice production by about 18 percent in the marketing year that began Oct. 1, Calpe said in an interview Oct. 7. Floods now affecting the south of India will also reduce production, Junior Food Minister K.V. Thomas said Oct. 6.
Production Losses
The last time stockpiles of the five largest exporters fell by a third was in 2002-2003, when India “had a bad monsoon, and prices then were low,” Calpe said. Rough rice futures on the Chicago Board of Trade reached a low of $3.52 per 100 pounds in April 2002.
Prices surged to a record $25.07 per 100 pounds in April 2008 and have almost halved since then as farmers around the world rushed to boost production to a record last year, replenishing stockpiles and averting a shortage.
The contract jumped 1.9 percent to $13.48 per 100 pounds yesterday, the steepest gain since Aug. 31, and was little changed at $13.47 as of 9:45 a.m. in Singapore.
Tropical Storm Ketsana and Typhoon Parma destroyed at least 7 percent of the Philippines fourth-quarter crop in the past week and wiped out inventories in parts of the country. The Philippines may import 2 million tons of rice in 2010 to cover losses from the storms, National Food Authority Assistant Administrator Jose Cordero, said in an interview in Bali today.
‘Supply Tighter’
Indonesia state food company Bulog said Oct. 6 the country may shelve plans for its biggest rice shipments in at least 50 years if dry weather caused by El Nino causes production to miss a state forecast of 40 million tons.
“Supply is going to get tighter,” Rogers said. “Production is going down for a variety of reasons. Many farmers cannot get loans,” limiting their ability to raise yield and expand acreage, he said.
Higher reserves in China, the world’s largest grower and consumer, may help slow the decline in total global stockpiles to 3 percent to 117.4 million metric tons, Calpe said in an interview Oct. 7.
Still, “we’ve not considered the flooding in the Philippines and El Nino in Indonesia because we did the estimate on Sept. 25,” Calpe said. “Next year, if there’s a bad year, then things are going to be more serious because then we’d have to work from much lower stocks.”
El Nino
The impact of El Nino, which can delay rains in Asia and cause flooding in South America, may also push global production lower next year, forcing affected countries to draw down inventories, she said.
“Indonesia is especially at risk and Australia of course,” Calpe said, referring to El Nino. The weather phenomenon may also lower yields in South America “because if it’s cloudy, they won’t get the proper sun and that’s very important for yields.”
While the slump in Indian production will drag total volume down, not all of the major exporters will see output and stockpiles drop, Calpe said.
Rice production in Vietnam, the world’s second-largest exporter, may climb to a record of between 37.9 million tons and 38.3 million tons in 2010, Pham Van Du, deputy director general of Vietnam’s Cultivation Department, said yesterday.
That compares with a 2009 output estimate of 37 million metric tons by the U.S. Department of Agriculture and a 2010 forecast of 36.05 million tons.
“At the moment, there is no evidence of supply shortages in the market,” Calpe said Oct. 7, adding that last year’s record prices were “not really triggered by shortages, it was an overreaction by governments and the market.”
Source : bloomberg.com